Cafeteria Plan Documentation: Just Do It!
Using Section 125 plans and their various components have become almost standard for any company offering employee benefits packages. The use of pre-tax dollars for payment of premiums, flexible spending account and dependent care accounts seems almost common place. However, the ease of use and implementation of these plans has also caused many plan sponsors to forget one of the basics of benefit plan administration: they have to have appropriate documentation.
Cafeteria plans generally meet the definition of "employee benefit plans" under ERISA that requires them to have appropriate documentation, such as summary plan description, that identify the plan sponsor, its obligations and the rights of the participants. Frequently sponsors use "off the self" documentation received from plan service providers without making sure the documentation is sufficient to satisfy ERISA obligations. Documentation is particularly important when considering making changes to plan administration because the law assumes the documents will be properly amended and appropriate notices will be sent to plan participants.
Our recommendation is that every employer that sponsors a Section 125 plan take the necessary step of having documentation created and maintained, regardless of the nature of the benefits available under plan. Otherwise, there is no reference source available to answer questions.
